The CAC 40 index in Paris experienced a significant drop of 0.63% amid declining luxury stocks, particularly following disappointing results from Richemont. Market reactions to the Federal Reserve’s recent interest rate cut of 25 basis points contributed to the downturn. Key luxury brands like Kering and LVMH saw substantial declines, reflecting concerns about the sector’s outlook, especially regarding uncertainties in the Chinese market. Other stocks, including JCDecaux and Euronext, also faced losses, while the euro and oil prices fell.
Significant Decline in the Paris Index
The CAC 40 index in Paris is facing a notable downturn this Friday afternoon, primarily influenced by the slump in luxury stocks following disappointing results from Richemont. Additionally, investors are processing the recent Federal Reserve meeting outcome, which, as anticipated, resulted in a reduction of interest rates by a quarter point.
As of midday, the CAC 40 is down 0.63%, resting at 7,379.09 points. Over the week, the index has reported an overall decrease of 0.5%.
Impact of the Federal Reserve Meeting
Market participants are reflecting on the Federal Reserve’s latest meeting. The central bank has lowered its key rates by 25 basis points (0.25 percentage point). During a recent press conference, Chairman Jerome Powell firmly stated that he would not resign if pressured by the elected American president, Donald Trump.
According to Sebastian Paris Horvitz from LBPAM, “Jerome Powell reiterated that the current monetary policy remains overly restrictive. Thus, the Fed is likely to pursue a path towards neutrality by continuing to reduce key rates, especially as inflation trends downward and the labor market stabilizes.”
The current decline in the CAC 40 is largely attributed to the poor showing of the luxury sector. Kering has dropped by 6%, Hermès is down 3.5%, and LVMH has seen a decline of 3.2%. L’Oréal, often linked to the luxury market, has decreased by 2.7%.
French luxury brands are also being negatively impacted by the disappointing results from Swiss company Richemont, which has fallen by 4.15% in Zurich. Analyst Jie Zhang from Alphavalue states, “The luxury sector is facing a downturn today, influenced by comments from Richemont’s management. While Johann Rupert expressed confidence in navigating the current market cycle, he acknowledged a lack of visibility regarding the recovery.” She further notes, “The new CEO, Nicolas Bos, also mentioned uncertainties in China, especially relating to the real estate sector, which is crucial for Chinese wealth.”
Another analyst suggested that profit-taking could be a factor as luxury stocks had seen strong performance in recent days. “The luxury market’s outlook appears grim, with concerns about a potential structural shift in Chinese luxury consumption and rising tariffs in the U.S. that might pressure profit margins,” they added.
In other market news, JCDecaux’s stock plunged by 9.4% after revealing disappointing forecasts for the upcoming quarter. Euronext also saw a decline of 0.9% after announcing medium-term objectives that fell short of expectations, according to Jefferies.
In the foreign exchange market, the euro has decreased by 0.2% against the dollar, trading at 1.0778 dollars. Additionally, oil prices are on the decline, with the January contract for North Sea Brent down 0.95% at 74.91 dollars per barrel, while the December WTI contract in New York has decreased by 1.27%, trading at 71.44 dollars per barrel.